What is the impact of health status?
"The greatest wealth is health” - Virgil
The member’s state of health is one of the main considerations particularly for those with money purchase benefits who intend to purchase an annuity as annuity rates are affected by factors such as:
Medical Conditions
The medical conditions that are taken into account by insurance companies are wide and varied.
For example:
If medical conditions exist, the member should consider an "impaired life annuity.” The annuity rates are enhanced as life expectancy is deemed to be shorter than for a person in good health. We will learn more about this next.
Impaired Life Annuity
David had a heart attack and could no longer work. The annuity that was originally quoted was £780 per annum. When he looked at impaired life annuities and his heart attack was taken into account; the amount increased to £969 per annum.
Heart attacks and strokes are common medical conditions, particularly as we get older.
How much an annuity provides will increase if a member has an impaired life annuity instead of a normal annuity.
For example, the amount of annuity a smoker receives would be higher than for a non-smoker as they are not expected to live as long.
The table illustrates the difference that being a smoker can make assuming the fund value is £100,000 and the member is purchasing an annuity at age 60.
| Smoker’s Annuity | Non-Smoker’s Annuity |
| £5,885.20 | £4,690.00 |
DB schemes and Ill-health
The scheme rules will state the level of benefits to be paid to a member with ill-health. For example the early retirement factor may not be applied or the member could receive benefits based on prospective service to Normal Retirement Age.
The Trustees will decide if enhanced early retirement benefits can be paid, based on medical evidence received
